AB 850, as amended, Nazarian. Public capital facilities: water quality.
Existing law, the Marks-Roos Local Bond Pooling Act of 1985, authorizes joint powers authorities, among other powers, to issue bonds and loan the proceeds to local agencies to finance specified types of projects and programs.
This bill would authorize
begin delete aend delete joint powers begin delete authority,end delete upon the application of a local agency that owns and operates a publicly owned utility, as defined, to issue rate reduction bonds to finance a utility project, as defined,
under specified circumstances. The bill would provide that the rate reduction bonds are secured by utility project property, as defined. The bill would authorize the authority to impose on, and collect from, customers of the publicly owned utility a utility project charge, as a separate nonbypassable charge, to finance the rate reduction bond. The bill would authorize the authority to adjust the utility project charge to correct for any overcollection or undercollection to ensure timely payment of the financing costs of the rate reduction bonds. The bill would require the authority to enter into a servicing agreement with the local agency for the collection of the utility project charge.
Vote: majority. Appropriation: no. Fiscal committee: no. State-mandated local program: no.
The people of the State of California do enact as follows:
Section 6585 of the Government Code is amended
The definitions in this section shall govern the
4construction and interpretation of this article.
5(a) (1) Except as provided in paragraphs (2) and (3), “authority”
6means an entity created pursuant to Article 1 (commencing with
7Section 6500) and includes any successor to the powers and
8functions of that entity.
9(2) In the case of an authority issuing bonds pursuant to this
10chapter in which VLF receivables, as defined in subdivision (j),
11are pledged to the payment of the bonds, other than VLF
12receivables so pledged for a county of the first class, an authority
13shall consist of not fewer than 100 local agencies.
14(3) In the case of an
authority issuing bonds pursuant to this
15chapter in which Proposition 1A receivables, as defined in
16subdivision (g), are pledged to the payment of the bonds, an
17authority shall consist of not fewer than 250 local agencies.
18(b) “Bond purchase agreement” means a contractual agreement
19executed between the authority and the local agency whereby the
20authority agrees to purchase bonds of the local agency.
21(c) “Bonds” means all of the following:
22(1) Bonds, including, but not limited to, assessment bonds,
23redevelopment agency bonds, government-issued mortgage bonds,
24and industrial development bonds.
25(2) Notes, including bond, revenue, tax, or grant anticipation
27(3) Commercial paper,
floating rate and variable maturity
28securities, and any other evidences of indebtedness.
29(4) Certificates of participation or lease-purchase agreements.
30(d) “Conservation or reclamation purposes” mean a utility
31project designed to reduce the amount of potable water to be
32supplied by a publicly owned utility or reduce the amount of water
P3 1imported by the publicly owned utility, including without
2limitation, storm water capture and treatment, water recycling,
3development of local groundwater resources, groundwater
4recharging, and water reclamation.
5(e) “Cost,” as applied to a public capital improvement, a utility
6project, or portion of the improvement or utility project financed
7under this part, means all of the following:
8(1) All or any part of the cost
of construction, renovation, and
9acquisition of all lands, structures, real or personal property, rights,
10rights-of-way, franchises, easements, and interests acquired or
11used for a public capital improvement or a utility project.
12(2) The cost of demolishing or removing any buildings or
13structures on land so acquired, including the cost of acquiring any
14lands to which the buildings or structures may be moved, and the
15cost of all machinery and equipment.
16(3) Finance charges.
17(4) Interest prior to, during, and for a period after, completion
18of that construction, as determined by the authority.
19(5) Provisions for working capital, reserves for principal and
20interest and for extensions, enlargements, additions, replacements,
21renovations, and improvements.
22(6) The cost of architectural, engineering, financial and legal
23services, plans, specifications, estimates, and administrative
25(7) Other expenses necessary or incidental to determining the
26feasibility of constructing any project or incidental to the
27construction or acquisition or financing of any public capital
28improvement or utility project.
32 “Financing costs” mean any of the following:
33(1) Interest and redemption premiums that are payable on rate
35(2) The cost of retiring the principal of rate reduction bonds,
36whether at maturity, including acceleration of maturity upon an
37event of default, or upon redemption, including sinking fund
39(3) A cost related to issuing or servicing rate reduction bonds,
40including, but not limited to, servicing fees, trustee fees, legal fees,
P4 1administrative fees, bond counsel fees, bond placement or
2underwriting fees, remarketing fees, broker dealer fees, independent
3manager fees, payment under an interest rate swap agreement,
4financial adviser fees, accounting report fees, engineering report
5fees, and rating agency fees.
6(4) A payment or expense associated with a bond insurance
7policy, financial guaranty or a contract, agreement, or other credit
8enhancement for rate reduction bonds or a contract, agreement, or
9other financial agreement entered into in connection with rate
11(5) The funding of one or more reserve accounts related to rate
14 (1) “Financing resolution” means a resolution adopted by
15the governing body of an authority financing a utility project with
16rate reduction bonds that establishes and imposes a utility project
17charge in connection with the rate reduction bonds in accordance
18with Section 6588.7
19(2) A financing resolution may be separate from a resolution
20authorizing the issuance of the rate reduction bonds.
22 “Legislative body” means the governing body of a local
25 “Local agency” means a
party to the agreement creating the
26authority, or an agency or subdivision of that party, sponsoring a
27project of public capital improvements, or any city, county, city
28and county, authority, district, or public corporation of this state.
30 “Mandate” means a requirement, imposed by a mandating
31entity by any means, including without limitation, a statute, rule,
32regulation, an administrative or judicial order, a building, operating,
33or licensing requirement or condition, or an agreement with, or
34license or permit from, the mandating entity, on a facility of a
35publicly owned utility or a facility operated in whole or in part for
36the benefit of a publicly owned utility, or on the operations of the
37publicly owned utility, or on the water pumped, acquired, or
38supplied by the publicly owned utility.
P5 1 (1) “Mandating entity” means the United States; a state of
2the United States; an agency, department, commission, or other
3subdivision of the United States or a state of the United States; a
4court of the United States or a state of the United States; or any
5other body or organization, that has jurisdiction over the operations
6of a publicly owned utility; the facility of a publicly owned utility,
7or a facility operated in whole or in part for the benefit of a publicly
8owned utility; or the water pumped, acquired or sold by a publicly
10(2) “Mandating entity” does not include a local agency that
11owns the publicly owned utility.
13 “Proposition 1A receivable” means the right to payment of
14moneys due or to become due to a local agency, pursuant to clause
15(iii) of subparagraph (B) of paragraph (1) of subdivision (a) of
16Section 25.5 of Article XIII of the California Constitution and
17Section 100.06 of the Revenue and Taxation Code.
19 “Public capital improvements” means one or more projects
20specified in Section 6546.
22 “Publicly owned utility” means a utility furnishing water
23service to retail customers that is owned and operated by a local
24agency or a department or other subdivision of a local agency and
25includes any successor to the powers and functions of the
26department or other subdivision.
28 “Rate reduction bonds” mean bonds that are issued by an
29authority, the proceeds of which are used directly or indirectly to
30pay or reimburse a local agency or its publicly owned utility for
31the payment of the costs of a utility project, and that are secured
32by a pledge of, and are payable from,
begin delete bondsend delete
33 as provided in Section 6588.7.
35 “Revenue” means income and receipts of the authority from
36any of the following:
37(1) A bond purchase agreement.
38(2) Bonds acquired by the authority.
39(3) Loans installment sale agreements, and other
40revenue-producing agreements entered into by the authority.
P6 1(4) Projects financed by the authority.
2(5) Grants and other sources of income.
3(6) VLF receivables purchased pursuant to Section 6588.5.
4(7) Proposition 1A receivables purchased pursuant to Section
6(8) Interest or other
income from any investment of any money
7in any fund or account established for the payment of principal or
8interest or premiums on bonds.
10 “Utility project” means the acquisition, construction,
11installation, retrofitting, rebuilding, or other addition to, or
12improvement of, any equipment, device, structure, improvement,
13process, facility, technology, rights or property, located either
14within, or outside of, the State of California, and that is used, or
15to be used, in connection with the operations of a publicly owned
16utility for conservation or reclamation purposes or in response to
begin delete related to water qualityend delete.
19 “Utility project charge” means a charge paid or to be paid
begin delete water distributionend delete customers of a publicly owned utility to pay
21financing costs of rate reduction bonds issued to finance a utility
22project for a publicly owned utility that is imposed pursuant to
23Section 6588.7, including any adjustment of the charge pursuant
24to Section 6588.7.
26 “Utility project property” means the property right created
27pursuant to Section 6588.7, including without limitation, the right,
28title, and interest of an authority for any of the following:
29(1) In and to the financing resolution and the utility charge
30established with respect to the rate reduction bonds, as adjusted
31from time to time in accordance with Section 6588.7.
32(2) To be paid the financing costs of the rate reduction bonds
33and to all revenues, collections, claims, payments, moneys, or
34proceeds for, or arising from, the utility project charge relating to
35the rate reduction bonds.
36(3) In and to all rights to obtain adjustments to the utility project
37charge relating to the rate reduction bonds pursuant to Section
P7 1 “VLF receivable” means the right to payment of moneys
2due or to become due to a local agency out of funds payable in
3connection with vehicle license fees to a local agency pursuant to
4Section 10754.11 of the Revenue and Taxation Code.
6 “Working capital” means money to be used by, or on behalf
7of, a local agency for any purpose for which a local agency may
8borrow money pursuant to Section 53852, or for any purpose for
9which a VLF receivable or a Proposition 1A receivable sold to an
10authority could have been used by the local agency.
Section 6588 of the Government Code is amended to
In addition to other powers specified in an agreement
14pursuant to Article 1 (commencing with Section 6500) and Article
152 (commencing with Section 6540), the authority may do any or
16all of the following:
17(a) Adopt bylaws for the regulation of its affairs and the conduct
18of its business.
19(b) Sue and be sued in its own name.
20(c) Issue bonds, including, at the option of the authority, bonds
21bearing interest, to pay the cost of any public capital improvement,
22working capital, or liability or other insurance program. In addition,
23for any purpose for which an authority may execute and deliver
24or cause to be executed and delivered certificates of participation
25in a lease or installment sale agreement with any public or private
26entity, the authority, at its option, may issue or cause to be issued
27bonds, rather than certificates of participation, and enter into a
28loan agreement with the public or private entity.
29(d) Engage the services of private consultants to render
30professional and technical assistance and advice in carrying out
31the purposes of this article.
32(e) As provided by applicable law, employ and compensate
33bond counsel, financial consultants, and other advisers determined
34necessary by the authority in connection with the issuance and sale
35of any bonds.
36(f) Contract for engineering,
architectural, accounting, or other
37services determined necessary by the authority for the successful
38development of a public capital improvement.
39(g) Pay the reasonable costs of consulting engineers, architects,
40accountants, and construction, land-use, recreation, and
P8 1environmental experts employed by any sponsor or participant if
2the authority determines those services are necessary for the
3successful development of public capital improvements.
4(h) Take title to, and sell by installment sale or otherwise, lands,
5structures, real or personal property, rights, rights-of-way,
6franchises, easements, and other interests in lands that are located
7within the state that the authority determines are necessary or
8convenient for the financing of public capital improvements, or
9any portion thereof.
10(i) Receive and accept from any source, loans, contributions,
11or grants, in either money, property, labor, or other things of value,
12for, or in aid of, the construction financing, or refinancing of public
13capital improvement, or any portion thereof or for the financing
14of working capital or insurance programs, or for the payment of
15the principal of and interest on bonds if the proceeds of those bonds
16are used for one or more of the purposes specified in this section.
17(j) Make secured or unsecured loans to any local agency in
18connection with the financing of capital improvement projects,
19working capital or insurance programs in accordance with an
20agreement between the authority and the local agency. However,
21no loan shall exceed the total cost of the public capital
22improvements, working capital or insurance needs of the local
23agency as determined by the local agency and by the authority.
24(k) Make secured or unsecured loans to any local agency in
25accordance with an agreement between the authority and the local
26agency to refinance indebtedness incurred by the local agency in
27connection with public capital improvements undertaken and
29(l) Mortgage all or any portion of its interest in public capital
30improvements and the property on which any project is located,
31whether owned or thereafter acquired, including the granting of a
32security interest in any property, tangible or intangible.
33(m) Assign or pledge all or any portion of its interests in
34mortgages, deeds of trust, indentures of mortgage or trust, or
35similar instruments, notes, and security interests in property,
36tangible or intangible, of a local agency to which the authority has
37made loans, and the revenues therefrom, including payment or
38income from any interest owned or held by the authority, for the
39benefit of the holders of bonds issued to finance public capital
40improvements. The pledge of moneys, revenues, accounts, contract
P9 1rights, or rights to payment of any kind made by or to the authority
2pursuant to the authority granted in this part shall be valid and
3binding from the time the pledge is made for the benefit of the
4pledgees and successors thereto, against all parties irrespective of
5whether the parties have notice of the claim.
6(n) Lease the public capital improvements being financed to a
7local agency, upon terms and conditions that the authority deems
8proper; charge and collect rents therefor; terminate any lease upon
9the failure of the lessee to comply with any of the obligations of
10the lease; include in any lease provisions that the lessee shall have
11options to renew the lease for a period or periods, and at rents as
12determined by the authority; purchase or sell by an installment
13agreement or otherwise any or all of the public capital
14improvements; or, upon payment of all the indebtedness incurred
15by the authority for the financing or refinancing of the public
16capital improvements, the authority may convey any or all of the
17project to the lessee or lessees.
18(o) Charge and apportion to local agencies that benefit from its
19services the administrative costs and expenses incurred in the
20exercise of the powers authorized by this article. These fees shall
21be set at a rate sufficient to recover, but not exceed, the authority’s
22costs of issuance and administration. The fee charged to each local
23obligation acquired by the pool shall not exceed that obligation’s
24proportionate share of those costs. The level of these fees shall be
25disclosed to the California Debt and Investment Advisory
26Commission pursuant to Section 6599.1.
27(p) Issue, obtain, or aid in obtaining, from any department or
28agency of the United States or of the state, or any private company,
29any insurance or guarantee to, or for, the payment or repayment
30of interest or principal, or both, or any part thereof, on any loan,
31lease, or obligation or any instrument evidencing or securing the
32same, made or entered into pursuant to this article.
33(q) Notwithstanding any other provision of this article, enter
34into any agreement, contract, or any other instrument with respect
35to any insurance or guarantee; accept payment in the manner and
36form as provided therein in the event of default by a local agency;
37and assign any insurance or guarantee that acts as security for the
P10 1(r) Enter into any agreement or contract, execute any instrument,
2and perform any act or thing necessary, convenient, or desirable
3to carry out any power authorized by this article.
4(s) Invest any moneys held in reserve or sinking funds, or any
5moneys not required for immediate use or disbursement, in
6obligations that are authorized by law for the investment of trust
8(t) At the request of affected local agencies, combine and pledge
9revenues to public capital improvements for repayment of one or
10more series of bonds issued pursuant to this article.
11(u) Delegate to any of its individual parties or other responsible
12individuals the power to act on its behalf subject to its general
13direction, guidelines, and oversight.
14(v) Purchase, with the proceeds of its bonds or its revenue, bonds
15issued by any local agency at public or negotiated sale. Bonds
16purchased pursuant to this subdivision may be held by the authority
17or sold to public or private purchasers at public or negotiated sale,
18in whole or in part, separately or together with other bonds issued
19by the authority.
20(w) Purchase, with the proceeds of its bonds or its revenue, VLF
21receivables sold to the authority pursuant to Section 6588.5. VLF
22receivables so purchased may be pledged to the payment of bonds
23issued by the authority or may be resold to public or private
24purchasers at public or negotiated sale, in whole or in part,
25separately or together with other VLF receivables purchased by
27(x) (1) Purchase, with the proceeds of its bonds or its revenue,
28Proposition 1A receivables pursuant to Section 6588.6. Proposition
291A receivables so purchased may be pledged to the payment of
30bonds issued by the authority or may be resold to public or private
31purchasers at public or negotiated sales, in whole or in part,
32separately or together with other Proposition 1A receivables
33purchased by the authority.
34(2) (A) All entities subject to a
reduction of ad valorem property
35tax revenues required under Section 100.06 of the Revenue and
36Taxation Code pursuant to the suspension set forth in Section
37100.05 of the Revenue and Taxation Code shall be afforded the
38opportunity to sell their Proposition 1A receivables to the authority.
39(B) If these entities offer Proposition 1A receivables to the
40authority for purchase and duly authorize the sale of the Proposition
P11 11A receivable pursuant to documentation approved by the
2authority, the authority shall purchase all Proposition 1A
3receivables so offered to the extent it can sell bonds therefor. If
4the authority does not purchase all Proposition 1A receivables
5offered, it shall purchase a pro rata share of each entity’s offered
6Proposition 1A receivables.
7(C) The authority may
establish a deadline, no earlier than
8November 3, 2009, by which these entities shall offer their
9Proposition 1A receivables for sale to the authority and complete
10the application required by the authority.
11(3) For purposes of meeting costs incurred in performing its
12duties relative to the purchase and sale of Proposition 1A
13receivables, the authority shall be authorized to charge a fee to
14each entity from which it purchases a Proposition 1A receivable.
15The fee shall be computed based on the percentage value of the
16Proposition 1A receivable purchased from each entity, in relation
17to the value of all Proposition 1A receivables purchased by the
18authority. The amount of the fee shall be paid from the proceeds
19of the bonds and shall be included in the principal amount of the
21(4) Terms and conditions of any and all fees and expenses
22charged by the authority, or those it contracts with, and the terms
23and conditions of sales of Proposition 1A receivables and bonds
24issued pursuant to this subdivision, including the terms of optional
25early redemption provisions, if any, shall be approved by the
26Treasurer and the Director of Finance, who shall not unreasonably
27withhold their approval. The aggregate principal amount of all
28bonds issued pursuant to this subdivision shall not exceed two
29billion two hundred fifty million dollars ($2,250,000,000), and the
30rate of interest paid on those bonds shall not exceed 8 percent per
31annum. The authority shall exercise its best efforts to obtain the
32lowest cost financing possible. Any and all premium obtained shall
33be used for either of the following:
34(A) Applied to pay the costs of issuance of the bonds.
35(B) Deposited in a trust account that is pledged to bondholders
36and used solely for the payment of interest on, or for repayment
37of, the bonds.
38(5) (A) In connection with any financing backed by Proposition
391A receivables, the Treasurer may retain financial advisors, legal
P12 1counsel, and other consultants to assist in performing the duties
2required by this chapter and related to that financing.
3(B) Notwithstanding any other provision of law, none of the
4following shall apply to any agreements entered into by the
5Treasurer pursuant to subparagraph (A) in connection with any
6Proposition 1A financing:
7(i) Section 11040 of the Government Code.
8(ii) Section 10295 of the Public Contract Code.
9(iii) Article 3 (commencing with Section 10300) and Article 4
10(commencing with Section 10335) of, Chapter 2 of Part 2 of
11Division 2 of the Public Contract Code, except for the authority
12of the Department of Finance under Section 10336 of the Public
13Contract Code to direct a state agency to transmit to it a contract
14for review, and except for Section 10348.5 of the Public Contract
16(C) Any costs incurred by the Treasurer in connection with any
17Proposition 1A financing shall be reimbursed out of the proceeds
18of the financing.
19(y) Finance utility projects through the issuance of
20bonds, and to impose and adjust utility project charges in
21connection with the financing pursuant to Section 6588.7.
22(z) Set any other terms and conditions on any purchase or sale
23pursuant to this section as it deems by resolution to be necessary,
24appropriate, and in the public interest, in furtherance of the
25purposes of this article.
Section 6588.7 is added to the Government Code, to
begin deleteA end delete
34 local agency that owns and operates a publicly owned
35 utility may apply to an authority to
36finance costs of a utility project for the publicly owned utility with
37the proceeds of rate reduction bonds. In its application to an authority for the
P13 1financing, the local agency shall specify the utility project to be
2financed by the rate reduction bonds, the maximum principal
3amount, the maximum interest rate, and the maximum stated terms
4of the rate reduction bonds.
6 A local agency shall not apply to an authority for financing
7of a utility project pursuant to this section unless the legislative
8body of the local agency has determined all of the following:
9(1) The project to be financed is a utility project.
10(2) The local agency is electing to finance costs of the utility
11project pursuant to this section and the financing costs associated
12with the financing are to be paid from utility project property,
13including the utility project charge for the rate reduction bonds
14issued for the utility project in accordance with this section.
15(3) Based on information available to, and projections used by,
16the legislative body, the
begin deletefinancing is expected to result in lowerend delete
begin delete to the customersend delete of the begin delete local agency’send delete publicly owned utility
begin delete compared with financingend delete the utility project begin delete throughend delete bonds payable
22revenues of the publicly owned utility.
24 (1) Subject to the requirements of Article XIII D of the
25California Constitution, an authority financing the costs of a utility
26project or projects for a local agency’s publicly owned utility with
27rate reduction bonds is authorized and directed to impose and
28collect a utility project charge with respect to the rate reduction
29bonds as provided in this section. The imposition of the utility
30project charge shall be made and evidenced by the adoption of a
31financing resolution by the governing body of the authority. The
32financing resolution with respect to financing a utility project or
33project with rate reduction bonds for a publicly owned utility shall
34include all of the following:
35(A) The addition of a separate charge to the bill of each customer
begin delete of distribution serviceend delete of the publicly owned utility in the class or
37classes of customers specified in the financing resolution.
38(B) A description of the financial calculation, formula, or other
39method that the authority is to use to determine the utility project
40charge. The calculation, formula or other method shall include a
P14 1periodic adjustment method to the then current utility project
2charge, to be applied at least annually, that shall be utilized by the
3authority to correct for any overcollection or undercollection of
4financing costs from the utility project charge or any other
5adjustment necessary to ensure timely payment of the financing
6costs of the rate reduction bonds, including, but not limited to, the
7adjustment of the utility project charge to pay any debt service
8coverage requirement for the rate reduction bonds. The financial
9calculation, formula, or other method, including the periodic
10adjustment method, established in the financing resolution pursuant
11to this section, and the allocation of utility project charges to, and
begin delete water distributionend delete customers
13 shall be decided solely by the governing body of the authority and
14shall be final and conclusive. In no event shall the periodic
15adjustment method established in the financing resolution be
16applied less frequently than required by the financing resolution
17and the documents relating to the applicable rate reduction bonds.
18Once the financial calculation, formula, or other method for
19determining the utility project charge, and the periodic adjustment
20method, have been established in the financing resolution and have
21become final and conclusive as provided in this section, they shall
22not be changed.
27 A requirement that the authority enter into a servicing
28agreement for the collection of the utility project charge with the
29local agency for which the financing is undertaken or its publicly
30owned utility and the local agency or its publicly owned utility
31shall act as a servicing agent for purposes of collecting the utility
32project charge as long as the servicing agreement remains in effect.
33Moneys collected by the local agency or its publicly owned utility,
34acting as a servicing agent on behalf of the authority, as a utility
35project charge shall be held in trust for the exclusive benefit of the
36persons entitled to the financing costs to be paid, directly or
37indirectly, from the utility project charge and shall not lose their
38character as revenues of the authority by virtue of possession by
39the local agency or its publicly owned utility. The local agency or
40its publicly owned utility shall provide the authority with the
P15 1information as to estimated sales of water and any other
2information concerning the publicly owned utility required by the
3authority in connection with the initial establishment and the
4adjustment of the utility project charge.
5(2) The determination of the legislative body of the local agency
6that a project to be financed with rate reduction bonds is a utility
7project shall be final and conclusive and the rate reduction bonds
8issued to finance the utility project and the utility project charge
9imposed relating to the rate reduction bonds shall be valid and
10enforceable in accordance with the terms of the financing resolution
11and the documents relating to the rate reduction bonds. The
12authority shall require, in its financing resolution with respect to
13a utility project charge, that as long as a customer
begin delete obligated to pay
14the utility project charge obtains water distribution service from
15the applicableend delete
17 publicly owned utility, the customer shall pay the utility project
18charge regardless of whether or not the customer
begin delete obtains water or from a person or entity other than
19water services other than water distribution serviceend delete
21the publicly owned utility. The utility project charge shall be a
22nonbypassable charge to all
begin delete water distributionend delete customers of the
23publicly owned utility in the class or classes of customers specified
24in the financing resolution
begin deletethat are receiving water distribution at the time of adoption of
25service from the publicly owned utilityend delete
26the financing resolution and all future
begin delete water distributionend delete customers
27in that class or classes. If a customer of the publicly owned utility
28that is subject to a utility project charge
begin delete ceases takingend delete water begin delete or water servicesend delete other than begin delete water distribution service fromend delete the publicly
31owned utility, the customer shall remain liable for the payment of
32its share of the utility project charge as if it had not
begin delete ceased
33the water or water service from the publicly owned utilityend delete
35continued payment of its share of the utility project charge as it
36accrues or by a one-time payment, as determined by the authority.
37All provisions of a financing resolution adopted pursuant to this
38subdivision shall be binding on the authority.
39(3) The timely and complete payment of all utility project
40charges by a person liable for the charges shall be a condition of
P16 1receiving water service from the publicly owned utility of the local
2agency and each of the local
begin delete agencyend delete and begin delete itsend delete publicly
begin delete utilityend delete is authorized to use its established collection
4policies and all rights and remedies provided by law to enforce
5payment and collection of the utility project charge. In no event
6shall a person liable for a utility project charge be entitled or
7authorized to withhold payment, in whole or in part, of the utility
8project charge for any reason.
9(4) The authority shall determine whether adjustments to the
10utility project charge relating to rate reduction bonds are required
11upon the issuance of the rate reduction bonds and at least annually,
12and at additional intervals as may be provided for in the financing
13resolution or the documents relating to the rate reduction bonds.
14Each adjustment shall be made and put into effect in accordance
15with the financial calculation, formula, or other method that the
16authority is to use to determine the utility project charge pursuant
17to the financing resolution expeditiously after the authority’s
18determination that the adjustment is required.
19(5) All revenues with respect to utility project property related
20to rate reduction bonds, including payments of the utility project
21charge, shall be applied first to the payment of the financing costs
22of the related rate reduction bonds then due, including the funding
23of reserves for the rate reduction bonds, with any excess being
24applied as determined by the authority for the benefit of the utility
25for which the rate reduction bonds were issued.
26(6) The authority shall be obligated to impose and collect the
27utility project charge relating to rate reduction bonds in amounts,
28based on estimates of water usage subject to the utility project
29charge, sufficient to pay on a timely basis the financing costs
30associated with the rate reduction bonds when due. The pledge of
31a utility project charge to secure the payment of rate reduction
32bonds shall be irrevocable, and the State of California, the
33authority, or any limited liability company acting pursuant to
34subdivision (i) shall not reduce, impair, or otherwise adjust the
35utility project charge, except that the authority shall implement
36the periodic adjustments to the utility project charge relating to
37rate reduction bonds as required by the applicable financing
38resolution and the documents relating to the rate reduction bonds.
39Revenue from a utility project charge shall be deemed special
40revenue of the authority and shall not constitute revenue of the
P17 1local agency or its publicly owned utility for any purpose, including
2without limitation, any dedication, commitment, or pledge of
3revenue, receipts, or other income that the local agency or its
4publicly owned utility has made or will make for the security of
5any of its obligations.
6(7) A utility project charge shall constitute a utility project
7property when, and to the extent that, a financing resolution
8authorizing the utility project charge has become effective in
9accordance with its terms, and the utility project property shall
10thereafter continuously exist as property for all purposes with all
11of the rights and privileges of this section for the period, and to
12the extent, provided in the financing resolution, but in any event
13until all financing costs with respect to the related rate reduction
14bonds are paid in full, including all arrearages thereon.
15(8) Utility project property shall constitute a current property
16right notwithstanding that the value of the property right will
17depend on consumers using water or, in those instances where
18consumers are customers of the publicly owned utility, the publicly
19owned utility performing certain services.
20(9) In the event a local agency for which rate reduction bonds
21have been issued and remain outstanding ceases to
begin delete provideend delete water begin delete distribution services, end deleteeither directly or through its
23publicly owned utility, references in this section to the local agency
24or to its publicly owned utility shall be to the entity providing
begin deletedistribution service end deletein lieu of the local agency
26and the entity shall assume and perform all obligations of the local
27agency and its publicly owned utility required by this section and
28the servicing agreement with the local agency while the rate
29reduction bonds remain outstanding.
31 (1) Rate reduction bonds shall be within the parameters of
32the financing set forth by the local agency pursuant to subdivision
begin delete(a) end deletein connection with the rate reduction bonds and the proceeds
34of the rate reduction bonds made available to the local agency or
35its publicly owned utility shall be utilized for the utility project
36identified in the application for financing of the utility project or
37projects pursuant to subdivision
begin delete (a)end delete.
38(2) An authority shall authorize the issuance of rate reduction
39bonds by a resolution of its governing body. Rate reduction bonds
40shall be nonrecourse to the credit or any assets of the local agency
P18 1and the publicly owned utility for which the utility project is
2financed and shall be payable from, and secured by a pledge of,
3the utility project property relating to the rate reduction bonds and
4any additional security or credit enhancement specified in the
5documents relating to the rate reduction bonds.
6(3) An authority issuing rate reduction bonds shall pledge the
7utility project property relating to the rate reduction bonds as
8security for the payment of the rate reduction bonds, which pledge
9shall be made pursuant to, and with the effect set forth in Section
105451 of the Government Code. All rights of an authority with
11respect to utility project property pledged as security for the
12payment of rate reduction bonds shall be for the benefit of, and
13enforceable by, the beneficiaries of the pledge to the extent
14provided in the documents relating to the rate reduction bonds.
15(4) To the extent that any interest in utility project property is
16pledged as security for the payment of rate reduction bonds, the
17applicable local agency or its publicly owned utility shall contract
18with the authority, which contract shall be part of the utility project
19property, that the local agency or its publicly owned utility will
20continue to operate its publicly owned utility system that includes
21the financed utility project to provide service to its customers, will,
22as servicer, collect amounts in respect of the utility project charge
23for the benefit and account of the authority and the beneficiaries
24of the pledge of the utility project charge and will account for and
25remit these amounts to, or for the account of, the authority.
26(5) Notwithstanding any other law, any requirement under this
27section, a financing resolution, any other resolution of the authority,
28or the provisions of the documents relating to rate reduction bonds
29to the effect that the authority shall take action with respect to the
30utility project property relating to the rate reduction bonds shall
31be binding upon the authority, as its governing body may be
32constituted from time to time, and the authority shall have no power
33or right to rescind, alter, or amend any resolution or document
34containing the requirement.
35(6) Notwithstanding any law, except as otherwise provided in
36this section with respect to adjustments to a utility project charge,
37the recovery of the financing costs for the rate reduction bonds
38from the utility project charge shall be irrevocable and the authority
39shall not have the power either by rescinding, altering, or amending
40the applicable financing resolution or otherwise, to revalue or
P19 1revise for ratemaking purposes the financing costs of rate reduction
2bonds, determine that the financing costs for the related rate
3reduction bonds or the utility project charge is unjust or
4unreasonable, or in any way reduce or impair the value of utility
5project property that includes the utility project charge, either
6directly or indirectly; nor shall the amount of revenues arising with
7respect to the financing costs for the related rate reduction bonds
8or the utility project charge be subject to reduction, impairment,
9postponement, or termination for any reason until all financing
10costs to be paid from the utility project charge are fully met and
11discharged. Except as otherwise provided in this section with
12respect to adjustments to a utility project charge, the State of
13California does hereby pledge and agree with the owners of rate
14reduction bonds that the State of California shall neither limit nor
15alter the financing costs or the utility project property, including
16the utility project charge, relating to the rate reduction bonds, or
17any rights in, to or under, the utility project property until all
18financing costs with respect to the rate reduction bonds are fully
19met and discharged. This section does not preclude limitation or
20alteration if and when adequate provision shall be made by law
21for the protection of the owners. The authority is authorized to
22include this pledge and undertaking by the State of California in
23the governing documents for rate reduction bonds. Notwithstanding
24any other provision of this section, the authority shall make the
25adjustments to the utility project charge relating to rate reduction
26bonds provided by this section and the documents related to those
27rate reduction bonds as may be necessary to ensure timely payment
28of all financing costs with respect to the rate reduction bonds. The
29adjustments shall not impose the utility project charge upon classes
30of customers which were not subject to the utility project charge
31pursuant to the financing resolution imposing the utility project
34 (1) Financing costs in connection with rate reduction bonds
35do not constitute a debt or liability of the State of California or of
36any political subdivision thereof, other than the special obligation
37of the authority, and do not constitute a pledge of the full faith and
38credit of the State of California or any of its political subdivisions,
39including the authority, but are payable solely from the funds
40provided therefor under this section and in the documents relating
P20 1to the rate reduction bonds. This subdivision shall in no way
2preclude guarantees or credit enhancements in connection with
3rate reduction bonds. All the rate reduction bonds shall contain on
4the face thereof a statement to the following effect:
5Neither the full faith and credit nor the taxing power of the State
6of California or any political subdivision thereof is pledged to the
7payment of the principal of, or interest on, this bond.
8(2) The issuance of rate reduction bonds shall not directly,
9indirectly, or contingently obligate the State of California or any
10political subdivision thereof to levy or to pledge any form of
11taxation to pay the rate reduction bonds or to make any
12appropriation for their payment.
14 (1) Utility project property shall constitute property for all
15purposes, including for contracts securing rate reduction bonds,
16whether or not the revenues and proceeds arising with respect
17thereto have accrued.
18(2) Subject to the terms of the pledge document with respect to
19a pledge of utility project property, the validity and relative priority
20of a pledge created or authorized under this section is not defeated
21or adversely affected by the commingling of revenues arising with
22respect to the utility project property with other funds of the local
23agency or the publicly owned utility collecting a utility project
24charge on behalf of an authority.
26 (1) There shall exist a statutory lien on the utility project
27property relating to rate reduction bonds. Upon the effective date
28of the financing resolution relating to rate reduction bonds, there
29shall exist a first priority statutory lien on all utility project
30property, then existing or, thereafter arising, to secure the payment
31of the rate reduction bonds. This lien shall arise pursuant to law
32by operation of this section automatically without any action on
33the part of the authority, the local agency or its publicly owned
34utility, or any other person. This lien shall secure the payment of
35all financing costs, then existing or subsequently arising, to the
36holders of the rate reduction bonds, the trustee or representative
37for the holders of the rate reduction bonds, and any other entity
38specified in the financing resolution or the documents relating to
39the rate reduction bonds. This lien shall attach to the utility project
40property regardless of who shall own, or shall subsequently be
P21 1determined to own, the utility project property including any local
2agency or its publicly owned utility, the authority, or any other
3person. This lien shall be valid and enforceable against the owner
4of the utility project property and all third parties upon the
5effectiveness of the financing resolution without any further public
7(2) The statutory lien on utility project property created by this
8section is a continuously perfected lien on all revenues and
9proceeds arising with respect thereto, whether or not the revenues
10or proceeds have accrued. Utility project property shall constitute
11property for all purposes, including for contracts securing rate
12reduction bonds, whether or not the revenues or proceeds arising
13with respect thereto have accrued.
14(3) In addition, the authority may require, in a financing
15resolution creating utility project property, that, in the event of
16default by the local agency or its publicly owned utility, in payment
17of revenues arising with respect to the utility project property, the
18authority, upon the application by the beneficiaries of the statutory
19lien, and without limiting any other remedies available to the
20beneficiaries by reason of the default, shall order the sequestration
21and payment to the beneficiaries of revenues arising with respect
22to the utility project property.
24 Notwithstanding any other law, an authority that has financed
25a utility project through the issuance of rate reduction bonds is not
26authorized, and no governmental officer or organization shall be
27 empowered to authorize the authority, to become a debtor in a case
28under the United States Bankruptcy Code (11 U.S.C. Sec. 1 et
29seq.) or to become the subject of any similar case or proceeding
30under any other law, whether federal or State of California, as long
31as any payment obligation from utility project property remains
32with respect to the rate reduction bonds.
34 An authority may elect to effect a financing of a utility project
35pursuant to this section through a single member limited liability
36company formed by the authority by authorizing the company to
37adopt the financing resolution and the authority’s issuing rate
38reduction bonds payable from, and secured by a pledge of, amounts
39paid by the company to the authority from the applicable utility
40project property pursuant to an agreement. The provisions of
begin delete (f) and (g)end delete shall apply to and be the
2exclusive method of perfecting a pledge of utility project property
3by the company securing the payment of financing costs under
4any agreement of the company in connection with the issuance of
5rate reduction bonds. Reference to the authority in this section and
6in all related defined terms shall mean or include the company as
7necessary to implement this subdivision.
Section 6590 of the Government Code is amended to
The authority may, from time to time, issue its bonds in
12the principal amount as the authority determines necessary to
13provide sufficient funds for its purposes, which may include, but
14shall not be limited to, providing funds for bond purchase
15agreements, payment of the purchase price of VLF receivables,
16payment of the purchase price of Proposition 1A receivables,
17financing utility projects, payment of interest on bonds of the
18authority, establishment of reserves to secure the bonds, and other
19expenditures of the authority incident to issuance of the bonds.
20The authority may also issue bonds for the purpose of making
21loans to local agencies, to the extent those local agencies are
22authorized by law to borrow moneys, or to purchase VLF
23receivables from local agencies as provided in Section 6588.5, or
24to purchase Proposition 1A receivables as provided in Section
256588.6, and the loan or sale proceeds shall be used by the local
26agencies to pay for public capital improvements, working capital,
27or insurance programs. The aggregate principal amount of all bonds
28issued pursuant to this section that are backed by Proposition 1A
29receivables shall not exceed two billion two hundred fifty million
30dollars ($2,250,000,000), and that issuance shall be approved by
31the Department of Finance and the Treasurer.
32In the case of any authority in existence on January 1, 1988, no
33loans shall be made to local agencies for working capital or
34insurance, unless that purpose is first approved by resolution of
35the governing body of the authority by unanimous vote of all
36members of the governing body.
Section 6591 of the Government Code is amended to
(a) The authority is authorized from time to time to issue
2bonds to provide funds to achieve its purposes.
3(b) Bonds may be authorized to finance any of the following:
4(1) A single public capital improvement, utility projects, working
5capital, purchase of VLF receivables, purchase of Proposition 1A
6receivables, or insurance program for a single local agency.
7(2) A series of public capital improvements, utility projects,
8working capital, purchases of VLF receivables, purchase of
9Proposition 1A receivables, or insurance program for a single local
11(3) A single public
capital improvement, utility projects, working
12capital, purchases of Proposition 1A receivables, or purchases of
13VLF receivables or insurance program for two or more local
15(4) A series of public capital improvements, utility projects,
16working capital, purchases of VLF receivables or purchases of
17Proposition 1A receivables or insurance programs for two or more
19(c) Bonds issued for the purpose of financing working capital
20shall be used to make loans to local agencies for any of the
21purposes for which a local agency may borrow money pursuant
22to Section 53852. The loans shall be repaid in accordance with the
23terms of Section 53854.
24(d) Except as otherwise expressly provided by the authority,
25every issue of its bonds shall be general obligations of the authority
26payable from any revenues or moneys of the authority available
27therefor and not otherwise pledged. These revenues or moneys
28may include the proceeds of additional bonds, subject only to any
29agreements with the holders of particular bonds pledging any
30particular revenues or moneys. Notwithstanding that the bonds
31may be payable from a special fund, these bonds shall be deemed
32to be negotiable instruments for all purposes, subject only to the
33bond registration provisions.
34(e) (1) The bonds may be issued as serial bonds or as term
35bonds, or the authority may issue bonds of both types. The bonds
36shall be authorized by resolution of the authority and shall, as
37provided by the resolution or indenture pursuant to which the bonds
38are issued, meet all of the following conditions:
39(A) Bear the date of issuance.
P24 1(B) Bear the time of
maturity, not exceeding 50 years from their
2date of issuance.
3(C) Bear the rate of interest, either fixed or variable, and, if
4variable, not in excess of the maximum rate of interest specified
6(D) Be payable as to principal and interest at the time or times
8(E) Be in the denominations and in the form provided.
9(F) Carry the registration privileges provided.
10(G) Be executed in the manner provided.
11(H) Be payable in lawful money of the United States at the place
12or places provided within or without the state.
13(I) Be subject to the terms of redemption provided.
14(2) Notwithstanding paragraph (1), the bonds backed by
15Proposition 1A receivables shall have a maturity date no later than
16August 1, 2013.
17(3) For bonds backed by Proposition 1A receivables, both of
18the following shall apply:
19(A) The option to call shall be exercised upon receipt by the
20authority of a timely written notification from the Director of
21Finance, but no earlier than 30 days after delivery by the director
22of a written notice of the intent to do so to the Joint Legislative
24(B) The bonds may bear interest payable on periodic interest
25payment dates or may accrue interest to their maturity date or any
26combination thereof, subject to the approval of the Department of
27Finance and the State Treasurer pursuant to subdivision (x) of
29(f) The bonds shall be sold by the authority at the time and in
30the manner set out in the authority’s resolution. The sale may be
31a public or private sale, and for price or prices, and on terms and
32conditions as the authority determines proper, after giving due
33consideration to the recommendations of any local agency to be
34assisted from the proceeds of the bonds. Pending preparation of
35the definitive bonds, the authority may issue interim receipts,
36certificates, or temporary bonds which shall be exchanged for
37definitive bonds. For bonds backed by Proposition 1A receivables,
38the authority shall use its best efforts to obtain the lowest overall
39cost of the bonds, and shall certify that it so used its best efforts.
40 The authority shall, in consultation with the Treasurer and
P25 1Department of Finance, structure the sale of the bonds backed by
2Proposition 1A receivables and shall include those terms and
3conditions approved by the Treasurer and the Department of
5(g) In the case of bonds issued by an authority, on or after
6January 1, 1995, for the purpose of purchasing bonds of a local
7agency, all of the bonds of the local agency shall be purchased by
8the authority from the proceeds of the authority bonds within 90
9days of the date of issuance of the authority bonds. Nothing in this
10subdivision shall be construed to preclude an authority from issuing
11parity bonds at any time.
Section 6592 of the Government Code is amended to
Any resolution authorizing any bonds or any issue of
16bonds may contain the following provisions, which shall be a part
17of the contract with the holders of the bonds to be authorized:
18(a) Provisions pledging the full faith and credit of the authority,
19or pledging all or any part of the revenues of any public capital
20improvements, or any revenue-producing contract or contracts
21made by the authority with any local agency, any VLF receivables
22purchased pursuant to Section 6588.5, any utility project property,
23any Proposition 1A receivables purchased pursuant to Section
246588.6, or any other moneys of the authority, to secure the payment
25of the bonds, and of any special account, subject to those
26agreements with bondholders as may then exist.
27(b) Provisions setting out the rentals, fees, purchase payments,
28loan repayments, and other charges, and the amounts to be raised
29in each year thereby, and the use and disposition of the revenues.
30(c) Provisions setting aside reserves or sinking funds, and the
31regulation and disposition thereof.
32(d) Limitations on the right of the authority or its agent to restrict
33and regulate the use of the public capital improvements to be
34financed out of the proceeds of the bonds or any particular issue
36(e) Limitations on the purpose to which the proceeds of sale of
37any issue of bonds may be applied, and pledging the proceeds to
38secure the payment of the bonds or any issue of the bonds.
P26 1(f) Limitations on the issuance of additional bonds, the terms
2upon which additional bonds may be issued and secured, and the
3refunding of outstanding bonds.
4(g) The procedure, if any, by which the terms of any contract
5with bondholders may be amended or abrogated, the amount of
6bonds and the holders thereof that are required to give consent
7thereto, and the manner in which the consent may be given.
8(h) Limitations on expenditures for operating, administrative,
9or other expenses of the authority.
10(i) Definitions of acts or omissions to act which constitute a
11default in the duties of the authority to holders of its obligations,
12and providing the rights and remedies of the holders in the event
13of a default.
14(j) The mortgaging of any public
capital improvements and the
15site thereof for the purpose of securing the bondholders.
16(k) The mortgaging of land, improvements, or other assets
17owned by a local agency for the purpose of securing the
19(l) Procedures for the selection of public capital improvements
20to be financed with the proceeds of the bonds authorized by the
21resolution, if the bonds are to be sold in advance of designating
22the public capital improvements and the local agency to receive
Section 6599.3 of the Government Code is amended
Notwithstanding any other provision of law, an action
28may be brought under Chapter 9 (commencing with Section 860)
29of Title 10 of Part 2 of the Code of Civil Procedure, to determine
30the validity of any bonds issued under this article to finance the
31purchase of bonds for local agencies, the financing of public capital
32improvements or utility projects, or the purchase of VLF
33receivables pursuant to Section 6588.5 or Proposition 1A
34receivables pursuant to Section 6588.6 and any contracts of sale
35of VLF receivables or Proposition 1A receivables or utility project
36property entered into by any local agency, and any related
37documents. If an action is commenced, the action shall be brought
38in the jurisdiction in which the authority maintains its principal
39office and is not required to be brought in the jurisdiction or
40 jurisdictions of any of the local agencies. However, publication of
P27 1summons, as provided in Section 861 of the Code of Civil
2Procedure, shall be made in the county in which the authority
3maintains its principal office and in each county in which any local
4agency that has sold bonds to the authority, for which a public
5capital improvement is being financed or that has entered into a
6sales agreement for a VLF receivable or a Proposition 1A
7receivable where the authority is located.
This act and all grants of power and authority in this
10act shall be liberally construed to effectuate their purposes, and
11all incidental powers necessary to carry into effect the provisions
12of this act are expressly granted to, and conferred upon, public
The provisions of this act are severable. If any
16provision of this act or its application is held invalid, that invalidity
17shall not affect other provisions or applications that can be given
18effect without the invalid provision or application.